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Missouri AG Files Criminal Charges Over Alleged Mortgage/Foreclosure Fraud
By Michael Kraus on February 7, 2012

This morning I learned that Chris Koster, the Missouri Attorney General, is pursuing criminal charges against DocX over alleged robo-signing. I learned of this action as a result of a post by Yves Smith on her blog NakedCapitalism, as well as a report by Gretchen Morgenson of the New York Times. In a press release, Missouri AG Chris Koster commented:

“Today’s indictment reflects our firm conviction that when you sign your name to a legal document, it matters. Mass-producing fraudulent signatures on millions of real estate documents across America constitutes forget. When you file those documents in our state, you are committing a crime under Missouri law”.

We’ve talked about robo-signing ad infinitum on this blog, but in the event you are totally unfamiliar with it, it is alleged that banks had employees sign hundreds or even thousands of affidavits without actually verifying the information therein or possibly even reading them. The paperwork was then used in the foreclosure process. 60 Minutes had a pretty good feature on robo-signing here.

This is, to my knowledge, only the second attorney general to pursue criminal charges over robo-signing. The first to do so was Nevada Attorney General Catherine Cortez Masto back in November. It is curious to me that more attorneys general have not filed criminal charges over what appears to be an open and shut case.

This could be interesting, we shall see where it goes.

Category: Mortgage Rates
Nevada Attorney General Pursuing Criminal Charges Against Robo-signers
1 By Michael Kraus on November 18, 2011

Earlier this week, Nevada Attorney General Catherine Cortez Masto filed criminal charges against two mid-level employees at Lender Processing Services over allegations of robo-signing. All told, these individuals face 606 felony and misdemeanor counts. These two employees are charged with filing thousands of falsified documents relating to foreclosures in Nevada. This is notable because to my knowledge, these are the first criminal charges levelled against robo-signers anywhere. From the press release:

“The Office of the Nevada Attorney General announced today that the Clark County grand jury has returned a 606 count indictment against two title officers, Gary Trafford and Gerri Sheppard, who directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008.

According to the indictment, defendant Gary Trafford, a California resident, is charged with 102 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor). The indictment charges defendant Gerri Sheppard, also a California resident, with 100 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor).”

Chief Deputy Attorney General John Kelleher stated that “there was a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008″.

Matthew Stoller has a piece posted over at Naked Capitalism were he posits that this may be an effort to apply pressure to these employees in order to get them to flip on their bosses, in much the same way that the mafia is prosecuted. I think that he is probably correct. I highly doubt that the whole robo-signing scheme was concocted by these employees and undertaken without the knowledge of anyone else at the company. It’s possible, but it seems unlikely.

Nevada was one of the states that was hardest hit by the real estate bubble. 60.4% of homes with mortgages in Nevada (342,000+) are underwater. About another 5% of homes have less than 5% home equity. Prices in many parts of Nevada are down by 60% or more since the market peaked in 2006. Although a tough new anti-foreclosure fraud law has caused foreclosure starts in Nevada to plummet, Nevada has consistently had one of the highest foreclosure rates in the nation for the past three years.

It is going to be fascinating to see where this case goes. I am happy to see that somebody has finally filed criminal charges against the financial fraud that seems to have been rampant in this country for years now.

Category: Mortgage Rates
Reuters: Despite Prohibition, Robo-Signing of Foreclosure Documents Continues
By Michael Kraus on July 19, 2011

There are a plethora of reports coming out today saying that the practice of robo-signing persists despite prohibitions against it.

In a nutshell, robo-signing occurs when an employee signs off on mortgage- or foreclosure-related documents to assure their accuracy without actually verifying that the documents are accurate. In some cases, signatures on documents were forged (here is a pretty good overview of the infamous Linda Green robo-signed documents from FireDogLake).

This occurred largely because of the securitization of mortgages and the resulting loss and/or destruction of documents crucial to proving ownership of a given home and establishing who has standing to foreclose on a home that is in default (for even more background, here is a 60 Minutes story on the issue from April).

In any case, robo-signing caused a big uproar during the fall and spring which resulted in temporary foreclosure moratoriums. In the wake of the scandal, major lenders and mortgage servicers promised to end the practice. Now a (highly informative) Reuters report suggests that robo-signing is still occurring:

Continue Reading…

Category: Mortgage Rates
Foreclosures Down in May as Result of Robo-Signing Scandal, Delays
By Michael Kraus on June 16, 2011

Foreclosures declined for the eighth straight month, according to reports from RealtyTrac. Foreclosure filings were down 33 percent from the previous year, and were down 2 percent month-over-month. The number of homes seized by lenders fell 3.8 percent from April to May to just shy of 67,000 repossessions. This represents a 29 percent year-over-year decrease.

James Saccacio, the CEO of RealtyTrac said that the declines are probably the result of the continuing fall-out from the robo-signing scandal. After massive paperwork errors were discovered in many foreclosures, several major banks put mortatoria on foreclosures until the issues were sorted out. Foreclosures have since resumed, but at a slower pace. It is far from clear that the original paperwork problems are now fixed. There is increased judicial and legislative scrutiny on foreclosures in light of the ongoing problems. Several lawsuits have gone against the Mortgage Electronic Registration System (MERS), and some states have passed more stringent foreclosure laws.

Delays in the foreclosure process are also creating a massive backlog of foreclosures where judicial foreclosures are required. Additionally, banks are having difficulty unloading many of the homes that they have already seized, leading to homes piling up in shadow inventory (homes that have or will be repossessed, but have yet to make their way to market). This means that lenders have little reason to seize additional homes, knowing that they will likely sit unsold.

I fully expect to see foreclosure numbers start increasing at some point in the near future, barring an economic turnaround or a series of big court rulings against MERS or major lenders. Despite the decrease in foreclosure, the housing market is far from out of the woods.

Category: Mortgage Rates
Massachusetts Register Rejects Robo-signed Documents as “Fraud Against Homeowners”
By Michael Kraus on June 8, 2011

There is an interesting new development today in the ongoing MERS/robo-signing/foreclosure disaster that I learned of from a blog post at Barry Ritholtz’ The Big Picture this morning. John O’Brien The Register of Deeds for South Essex County in Massachusetts is refusing to record robo-signed documents. Briefly, robo-signing was/is the practice of forging signatures on affadavits and documents needed in order to prove ownership to foreclose on a home (click here to see a 60 Minutes piece on this practice). In a press release, O’Brien stated:

“My Registry will not be a knowing participant in this fraud against homeowners. From today forward, lenders be on notice, the Southern Essex District Registry of Deeds will not record robo-signed documents.”

O’Brien noted that his office has documents signed by several alleged robo-signers, including 22 varying signatures for Linda Green. He continued:

“I find this practice very troubling on many levels. It has completely jaded my understanding that a notarized document was something that could be relied upon. If these documents are signed by anyone other than the noted signatories, these notaries and those that employed them should be held accountable for the fraudulent documents that they have produced and the havoc they have caused to chains of title everywhere.”

This is not the first time O’Brien has pushed back against mortgage abuses. Previously, we discussed O’Brien’s efforts to recoup millions of dollars worth of missed recording fees from MERS (the Mortgage Electronic Registration System). Other country registers have taken similar actions, including Jeff Thigpen, the Register of Deeds for Guilford County, North Carolina. Officials in Suffolk County, New York have also mulled the possibility of suing MERS over missed revenue from recording fees.

Continue Reading…

Category: Mortgage Rates
State Attorneys General Disagree Over Proposed Foreclosure Settlement
2 By Michael Kraus on March 15, 2011

Although overshadowed by other recent news stories, the foreclosure/robo-signing mortgage settlement has generated a fair amount of discussion since it came out about two weeks ago. The “investigation” into the foreclosure practices of large banks by all 50 state attorneys general was supposed to get down to the bottom of the foreclosure-fraud/robo-signing debacle. Lead by Attorney General Tom Miller of Iowa (who at one point promised to “put people in jail“), the investigation and proposed settlement has drawn widespread criticism.

The settlement has been ripped by critics on both sides of the issue, some saying it doesn’t go far enough, while others say it goes way too far. Large and small banks criticize it as “stealth cramdown legislation“. Yves Smith of Nakedcapitalism.com has termed it a “bailout as reward for institutionalized fraud“. I for one am very skeptical of the efficacy of any sort large fund that is meant to provide restitution to those hurt by the allegedly fraudulent action of large banks. Ultimately, the numbers bandied about in the settlement seem to pale in comparison to the damage done (additionally a similar type of fund isn’t working so well in the BP settlement).

This morning a Housingwire.com article by Jon Prior and Christine Ricciardi says that not even all the attorneys general are on the same page about the settlement. According to the article, Utah Attorney General Mark Shurtleff hasn’t even seen a copy of it. The AGs of both Oklahoma and Virginia oppose the settlement, and as many as a dozen states total are not on board.

The proposed settlement is by no means final, and AG Tom Miller has said it will take several more months to hammer out a finalized agreement. I am very skeptical that we will see any sort of agreement that is able to appease those on the left and right, as well as the various attorneys general, the banks, and aggrieved homeowners. Do you think we will every actually see some sort of settlement here? Let me know in the comments section below.

Category: Mortgage Rates
Ally Financial Cancels Robo-Signed Foreclosures in Maryland
By Michael Kraus on January 20, 2011

Per an article in yesterday’s Washington Post by Dina ElBoghdady and Ariana Eunjung Cha, Ally Financial is withdrawing all foreclosures in the state of Maryland that were robo-signed by Jeffrey Stephan. Ally intends to resubmit the foreclosures down the road. In case you were unaware, “robo-signing” may or may not have been a widespread process whereby lender employees signed thousands of documents without review or in some cases, any knowledge of what they were signing whatsoever. For further background on the robo-signing mess, check this piece, among others, on Yves Smith’s Naked Capitalism site.

Ally Financial, previously known as GMAC, said it will resubmit around 250 foreclosures in Maryland in light of the robo-signing. Curiously, it has no plans to do so in other states. From the article:

“What they’re doing is triage,” said Ira Rheingold, executive director of the National Association of Consumer Advocates. “They’re thinking: We’ve got a problem in Maryland. Let’s get in front of it. But they’re naive if they think that what they’re doing in Maryland is going to shut the door on their troubles elsewhere.”

There is increasing judicial pushback against banks for a variety of improprieties, largely relating to mortgage securitization and foreclosures. A key ruling in the Massachusetts Supreme Court invalidated at least some foreclosures in that state earlier in the month. Recent litigation in Utah and New York has also gone against the banks. The Virginia legislature has proposed new laws that will greatly affect foreclosures in that state. Per the aforementioned Washington Post article, a Maryland lawsuit where the court dismissed an Ally Financial foreclosure may have prompted the widespread withdrawal of foreclosures by Ally, although Ally’s lawyers deny this. It appears likely that Ally is trying to avoid setting a precedent that could hurt it nationally.

This is just another example of the extreme uncertainty that surrounds the foreclosure situation in this country. Nobody knows for sure where this is going, but pressure on lenders and servicers is increasing by the day. Stay tuned.

Category: Mortgage Rates
Florida AG Office Details “Unconscionable” Foreclosure Practices
By Michael Kraus on January 6, 2011

I learned of this report “Unfair, Deceptive, and Unconscionable Acts in Foreclosure Crisis“ compiled by the Florida Attorney General’s Office through Barry Ritholtz’ great site The Big Picture. Although it doesn’t really cover any ground that we haven’t seen covered through any number of blogs (most prominently Yves Smith’s Nakedcapitalism.com, Mike Konczal’s Rortybomb.com, and the afforementioned The Big Picture) or during the congressional testimony of Georgetown Law Prof. Adam Levitin and Diane Thompson of the National Consumer Law Center, it is important to see these issues covered by an entity with actual prosecutorial powers.

For a little background, Florida is in many ways at the epicenter of the foreclosure crisis (along with Arizona, Nevada, and California). The housing market in Florida is arguably one of the worst in the country, and the state has become notorious for its so called “rocket docket“.

The presentation breaks down, in a step-by-step format, how mortgages were originated, securitized, and sold to investors as mortgage backed securities. The process broke down as notes and mortgages got lost and ownership of titles and mortgages became confused. As the presentation says: “keep in mind these are some of the largest banks in the country…losing ownership paperwork!!”

Continue Reading…

Category: Mortgage Rates
Jail Time Promised in Foreclosure Fraud/Robo-Signing Investigation
4 By Michael Kraus on December 15, 2010

Several months ago, the 50 states attorneys general joined together to investigate allegations of widespread fraud in the mortgage industry. Since that time, we have learned that the goal of the probe is supposedly “widespread mortgage modifications“, but we have heard little else about the investigation. There were rumors that lenders wanted to settle the case quickly and pay some form of fine or restitution to homeowners who may have been wronged. Well, it appears that Iowa Attorney General Tom Miller want to go a little further. At a homeowner advocate meeting in Des Moines, he commented:

"We're not going to one of those resort white collar prisons...."

“We will put people in jail.”

According to Miller, criminal prosecutions will be a part of whatever settlement comes out of the joint investigation. This is somewhat reassuring to me, even if it is only a bargaining tactic in order to prompt confessions.

The investigation, which began in the Fall after allegations of robo-signing, improper foreclosure, improper securitization, and other frauds came to the forefront. Although some of the major lenders suspended foreclosures while they “investigated” the allegations, most have since resumed and ramped up their foreclosure processes.

Continue Reading…

Category: Mortgage Rates
Fannie and Freddie Resume Foreclosure Sales, Not Accepting Cured Mortgage Repurchases
By Michael Kraus on November 30, 2010

Two pieces of somewhat tangentially related news about everyone’s favorite mortgage giants, Fannie Mae and Freddie Mac:

First, Freddie and Freddie are telling real estate agents to resume the sale of foreclosed properties owned by the GSEs. Sales of foreclosed properties had been placed on hold for the previous two months as a result of the robo-signing foreclosure mess (if you are unfamiliar with the robo-signing/securitization disaster, this article by Mike Konczal is a good place to start). I am really not sure what has changed that prompted the GSEs to lift this moratorium. Ally Financial, JP Morgan Chase, and Bank of America all lifted foreclosure moratoriums they imposed while they took a closer look at their foreclosure processes. There is still an on-going joint investigation into lender behavior by all 50 state attorneys general. Lawsuits against major banks are mounting from both borrowers and investors in mortgage backed securities. Congressional hearings into the matter are ongoing, and everyday it appears that additional misdeeds are brought to light. On the one hand foreclosures (and foreclosure sales) must proceed if the housing market is to recover, on the other hand I believe we need to do our utmost to make sure the foreclosures are, you know, legal. The show must go on, I suppose.

The second piece of news is that Fannie Mae will no longer allow lenders to redeliver mortgages that were repurchased, even if defects in the mortgage were cured. Mortgage repurchase agreements are indemnification clauses that buyers of mortgage backed securities put in purchase contracts. These clauses stipulate that the buyer can force the seller to buyback the securities in the event that the underwriting (or other origination processes) for the underlying mortgages was defective and the mortgages defaulted. Many investors in mortgage backed securities are looking into the possibility of pursuing mortgage buybacks against major lenders for violating purchase agreements.

There’s not a whole lot else for me to say about these two items.

Category: Mortgage Rates